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Thursday, July 14, 2005

Cases: Arbitration not unconscionable

Ohio_flag_3 An arbitration clause in a gym contract is not unconscionable even where it strictly limits damages and provides that the proceedings shall be confidential, according to the Ohio Court of Appeals in a recent decision.

In the cases, plaintiff John Cronin joined a gym called California Fitness. He signed a two-page contract, which included an arbitration agreement that, among other things, required the party making the claim to pay the arbitration costs, provided that no discovery could be had, and capped total damages for either party at an amount equal to the annual membershp fee. It also provided that the results of the arbitation must be kept confidential. After numerous difficulties in his dealings with the gym, he sued for breach of contract and violations of the Ohio Consumer Sales Practices Act, seeking compensatory and punitive damages. A trial court issued a stay pending arbitration, and Cronin appealed.

He claimed the arbitration clause was unconscionable because it denied him a real chance to redress his grievances and that the confidentiality provision violated the Ohio CSPA’s purpose to deter fraudulent conduct in consumer transactions.

No dice, said the court. There was no substantive unconscionability because the provision bound both parties equally and the plaintiff could not show that in fact it prohibited him from getting any redress. It was not procedurally unconscionable because the contract was not unduly long, the provision was clearly labeled, it specifically provided that Cronin had the right to rescind the deal within three days if he were not satisfied, and there was no evidence he could not understand the provisions. As for the confidentiality clause, so long as the contract is not itself unconscionable, Ohio’s "strong presumption in favor of arbitrability outweighs consumer protection interests represented by the CSPA." Affirmed.

Cronin v. California Fitness, 2005 Ohio App. LEXIS 3056 (Ct. App., June 28, 2005).

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